Kansas Republicans seek reprieve for corporate farming

Saturday

Feb 23, 2013 at 12:01 AM

By Amy Bickel The Hutchinson News

Speaking to Kansas State's agricultural college a month before the November 1930 election, Republican candidate for governor Frank Haucke gave students a vision of what could happen to the rural Kansas landscape.

"Let corporation farming take over the farming business of Kansas, and we may as well nail shut the doors of all these higher institutions of learning and 100 percent of our rural schools," he said bluntly of the Republican platform of the time. "There will be no farm children."

Haucke would lose out in what was a three-way Kansas governor's race between himself, the infamous goat-gland transplantation specialist Dr. John Brinkley and Democrat Harry Hines Woodring, with Woodring, Roosevelt's future Secretary of War, named the winner. But Haucke's outspoken platform against corporate farming didn't disappear with the election.

Kansas legislators, fearing mass depopulation amid the beginnings of the Great Depression, enacted law in 1931 making it illegal for corporations beyond the family farm to do business in the state.

Now, more than 80 years later, Kansas Republicans are asking state lawmakers to repeal the measure they worked so hard to establish, and with much the same assertion: the law restricting corporate involvement in agriculture is hurting growth in rural Kansas where population has been hemorrhaging since Haucke ran for governor.

Kansas Agriculture Secretary Dale Rodman told freshman legislators during an orientation in January that the state's anti-corporate farming laws hinder the growth of agriculture and recruitment of new agribusinesses to Kansas.

Meanwhile, in a letter to Rodman last month, Attorney General Derek Schmidt questioned the constitutionality of one part of the law.

"Our corporate farming laws need to be repealed," said Rodman, a former executive with agribusiness giant Cargill. "Basically, our state is an under-utilized asset."

While some farm groups, including Kansas Farm Bureau and the Kansas Livestock Association, are advocating the plan, others fear what Haucke did so long ago - that the change will ouster more small family farms and depopulate rural Kansas.

"If we open our arms to corporate agriculture to come on in, that just screws the little guys," said Donn Teske, president of the Kansas Farmers Union. "I could certainly see the exodus of family farmers from agriculture."

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Just eight other states - North and South Dakota, Oklahoma, Iowa, Minnesota, Missouri, Wisconsin and Nebraska - have restrictions on corporate farming.

At issue, however, is a 2007 ruling by the 8th District U.S. Circuit Court of Appeals that Nebraska and South Dakota's laws are unconstitutional. Rodman feared the same for Kansas law, which limits corporate ownership of agriculture land to family farms with 15 or fewer stockholders. At least one of the stockholders must live on the farm and work the land.

There are exceptions for feedlots and poultry operations, Also, with a change in law last year, county commissioners can approve corporate dairies and hog farms within a county's borders.

For the most part, little keeps mega-livestock corporations from coming into the state.

Yet, Chad Bontrager, the agriculture department's economist and agribusiness development coordinator who used to run one of Cargill's Kansas flourmills, said cutting out the loopholes helps better attract such firms.

"The problem is it is a red flag to these corporations wanting to come in," he said of the current law. "We are saying, 'Hey, we are probably not open to your kind of business.'"

Some, however, fear changes could mean large ag companies could come in and buy farmland at higher prices than a Kansas farmer could pay. They also worry foreign investors will emerge, putting the nation's food supply into the hands of other countries.

Ottawa County farmer and Kansas Farm Bureau President Steve Baccus dismisses such notions.

"We have a governor and secretary of agriculture doing everything they can do grow the Kansas economy," Baccus said. "It's difficult when you have the kind of laws we have. This isn't a business-friendly state.

"We have lost revenue, jobs, schools, people," he said. "We have lost entire rural communities because we are continuing with the status quo. ... I think and Kansas Farm Bureau believes we need to step forward, be proactive and do what we can to create jobs in the rural communities."

A supporter of anti-corporate farm laws, Chuck Hassebrook, executive director of the Center for Rural Affairs based in Nebraska, said any individual, for the most part, can invest in land, despite corporate farm regulations. The biggest factor, he said, is liability.

"What (current law) says is we aren't going to give big investors special advantages," he said. "If they want to invest in agriculture, they should do it the same way family farmers do."

Corporate farm law helps provide a level playing field, he said.

"If wealthy investors want to invest in agriculture, they have to do so under the same rules of family farmers," he said. "They pay taxes as individuals - that is what most family farmers do. ... If you take that away, you get into something that favors the rich and powerful.

"Farming is a risky business," he said. "But people wanted to use the corporate vehicle as a shield."

Hassebrook helped shape Nebraska's Ballot Initiative 300 in the early 1980s - a law known as the strongest and most restrictive corporate farm measure in the United States.

In 2007, an 8th District U.S. Court judge deemed the measure unconstitutional. The Supreme Court refused to hear the case.

"I think, to some extent, what we are seeing is activist judges who are pro-corporate and anti regulation," he said.

Teske, meanwhile, fears repealing the law will cause more family farmers to disappear, just like independent dairy and swine operations did when the law changed in the 1990s.

"I'm an old, has-been dairyman, and every big dairy that goes in takes out 10 to 12 small dairies," Teske said. "It will just concentrate land with the wealthiest."

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State leaders say they aren't worried about corporations buying up farmland or driving farmers out of business Bontrager, with the ag department, said the state's anti-corporate farming measure, in fact, is keeping the agricultural economy from growing.

Bontrager said he has been on the job six months and he already has had inquiries from a handful of corporations interested in raising hogs in Kansas, as well as two or three interested in poultry production.

"And we have been contacted by so many dairies that I don't have the number," he said. "People are interested in doing business today with the restrictions in place. If there are folks interested today with the restrictions we have, there is a whole long line of people when we don't have those restrictions."

The move helps ensure the food supply, he said.

"In 2050, there is going to be 9 billion people in the world, and 96 percent of the customers of Kansas agriculture are outside of the United States," he said. "What we are seeing today is that as these countries like Brazil, Russia, India and China grow their economies and their people become wealthier, they will consume more protein, wheat, dairy, and somebody has to supply them that."

He added that the change won't hurt Kansas' family farms. Instead, he points out:

* At present, about 85 percent of Kansas farmers are individual family/sole proprietorship arrangement, 3.9 percent are family held corporation and 8.5 percent are partnerships.

* Only 0.4 percent of Kansas farms are nonfamily corporations. That compares to 0.7 percent in North Carolina and 0.3 percent in New Mexico - both states with no corporate restrictions.

* Land values have increased by 33.5 percent in the past year in Nebraska, 22.8 percent in Iowa and 19.2 percent in Kansas - all states with anti-corporate farm measures. Illinois and Indiana, states with no corporate farm restrictions, have increased by roughly 17 percent.

* The average Kansas farm is 707 acres. That compares to New Mexico, 2,066; Texas, 527; and Illinois, 348.

"There is no indication that corporate farm laws protect the small family farmer," he said.

Moreover, he said, he doesn't fear big corporations squeezing out family farmers if the law is abolished.

"In my opinion, an agricultural company like Cargill, ADM, Bunge or whatever comes to mind, they don't want to precisely manage each field - every square foot of growing space. They don't want to deal with the weather, fuel price and seed price. They don't want to maintain the equipment. ... At the end of the day, it makes more sense to have the grain delivered to them."

Bontrager noted the economic windfall could be generous if the changes were made to the law. If the state grew swine and dairy production by 10 percent, the increase would create 1,570 jobs, along with 418 indirect jobs and 552 induced jobs.

Labor income would total more than $102 million with another $180 million in added gross regional product.

But even without a change, the agriculture department notes agriculture has grown exponentially in the past decade.

Agriculture is the largest industry in Kansas. It employees 250,000 Kansans and contributes $21 billion directly to the state economy. Another 178,000 jobs are supported by agriculture activity and an additional $13 billion in economic activity occurs because of Kansas agriculture.

Moreover, the state's first large-scale dairy was built in Hamilton County about 20 years ago. Today, nearly two dozen dairies in western Kansas milk at least 1,000 head of cows or more.

Eliminating the law, however, wasn't taken lightly, Bontrager said.

"We take Kansas agriculture very seriously," he said. "We don't want to do anything that would damage it. We are completely comfortable that this is the right thing to do. We had some of the same concerns and some thoughts that others have had - but (are these concerns) really going to happen? We are 100 percent confident it won't."

"We have some really proud traditions in Kansas," he said. "When we think of agriculture, we think of family farms, and that doesn't necessarily need to go away. But Kansas farmers don't have the capital at their disposal to make the kind of changes to expand in order to compete. We need to attract that capital from the outside."

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On the family farm near McPherson, producer Darryl Larson has seen the effects of big agriculture. The cow/calf producer said it has been tough to compete in a climate where four packers control the industry.

For instance, he said, he and his brother, for a time, retained ownership of their cattle and put them in a commercial feed yard. But in the end, they had few choices when it was time to sell.

Now they take their herds to a local sale barn, but Larson said even that isn't like it used to be.

There are fewer sale barns across Kansas, he said, and even the ones still in operation aren't seeing the cattle buyers they once did.

The difficulty to market his cattle, as well as the drought, has caused him to cut back on his cattle herd.

"I'm very much opposed to corporate farms coming into the state of Kansas and running independent farmers out of business," said Larson, president of his county's farmers union.

He added because of his own situation, he has mixed emotions. He would rather see independents provide the protein to packers, he said, but noted the current marketing system "makes it difficult for the smaller producer.

"That was the last nail in the coffin - the lack of markets for our beef," he said, but added, "I can see where corporate animal agriculture coming into the state could be a benefit for some commodity farmers."

Long gone, after all, are the days of farmers making a living on 160 acres. Progress - bigger equipment and better technology - has forced out the little operator as farms grew in size, thus depopulating the rural Kansas landscape.

The Farm Bureau's Baccus, however, doesn't believe it will run his farm members out of business.

"Let's stop turning away business and revenue and jobs and people and start establishing this," he said.

Populating rural Kansas is a great idea, but Larson wonders who will work the jobs if more corporate livestock production is brought to Kansas.

"Historically, at least, corporate ag has always created a demand for undocumented low-paid workers," he said. "I don't want to see any more undocumented illegals coming to this country to fill positions."

Bontrager admitted current legislation in the Senate would not address the agriculture labor shortages that exist in some regions, adding that skilled workforce is critical for agriculture growth and a factor when companies consider locating to Kansas.

But with a foot of snow blanketing McPherson County this weekend, Larson will be out, making sure his cattle are well cared for.

"I don't know if it is true that Americans won't do those jobs anymore, but I'm an American, and I'm doing this job every day," Larson said. "The independent producer is a group of a very few people willing to put the hours in with the type of working conditions, especially when it comes to animal agriculture."